|For the moment, the mighty American consumer continues to prop up whatever remains of the tattered U.S. economy.
Retail sales climbed 1.2% in July, according to the Commerce Department, on top of an upwardly revised gain of 8.4% in June. Leading the way is a 22.9% surge in electronics and appliance sales.
Overall, retail sales are now just as strong as they were before the pandemic hit. But again, these are July numbers. What happens now that the extra $600 a week in unemployment benefits are gone?
In contrast, U.S. industry is still nowhere near where it was before the lockdowns.
Industrial production rose 3% in July, according to the Federal Reserve. That’s the good news. The bad news is that it’s still 8.4% shy of February’s level.
The capacity utilization number continues to improve as well; 70.6% of U.S. industrial capacity was in use during July. Again, that’s the good news. The bad news is that it’s still one of the lowest levels on record going back more than 50 years…
The outlook for the rest of the year is for the rate of improvement to slow — especially given moderating levels of auto sales.
The major U.S. stock indexes are meandering as the week winds down.
The Dow is slightly in the green, the S&P 500 is flat, the Nasdaq is down about a third of a percent.
Gold rests nearly unchanged from 24 hours ago at $1,940; silver’s at $26.50. Crude is down a smidge, but still over $42 a barrel.
Among the big winners of the current earnings season — cannabis stocks.
Not that the mainstream would notice; your typical financial news outlet focuses on the percentage of companies that beat analyst estimates — a head game corporate accountants play with great skill.
More revealing is the actual growth or shrinkage in profits: “So far,” says our penny pot stock authority Ray Blanco, “about 31 of the 63 cannabis companies tracked by the Bloomberg Global Cannabis Competitive Peers Index have reported their numbers for the quarter. Of those, the average year-over-year earnings growth reported has been 83%.”
In comparison, earnings for the typical S&P 500 stock have fallen 9.3%.
“Put simply, the cannabis industry is growing up,” Ray says — “and the companies within it are becoming real, meaningful businesses with real, meaningful profits.”
And those profits are only set to grow as more cash-strapped state governments look to cannabis legalization as a new source of revenue.
Welcome to the era of the “speakeasy gym.”
We’ve previously taken note of gym owners openly defying state lockdown orders — with unfortunate results that include getting their utilities shut off.
In contrast, many others are proceeding covertly.
Get a load of NPR with a variation on the old saw about how gun control doesn’t work…
“Prohibitions don’t eliminate things. They drive them underground,” Harvard economist Jeffrey Miron tells NPR. Miron has been studying this phenomenon for three decades.
Case in point — a gym rat in Tucson, Arizona, named Christina, “who asked us not to give her last name for fear of being labeled a snitch,” says NPR. Being a regular, she got a text from the gym owner in mid-April, inviting her to come back.
Imagine her surprise when she showed up, though. “She used her fob to get in the gym’s doors, and ‘there’s over 10 people there that I’ve never seen before in my life,’ she says.”
No masks, no distancing, no sanitizing the equipment, either. They were refugees from chain gyms that were complying with shutdown orders. And the owner was charging them a higher rate.
Law of unintended consequences, anyone? “When markets get pushed underground, quality control tends to go down,” the NPR story says. “In the case of drugs, this means potentially finding rat poison in your weed. When it comes to gyms in the COVID-19 era, it means potentially creating fitness environments that are even more likely to spread the virus than if they were legal and regulated. ‘When you drive something underground, your ability to regulate it goes away,’ Miron says.”
And Miron finds the level of compliance goes down the longer a prohibition goes on. Just wait till winter arrives in the more northern reaches of these United States…
To the mailbag, and feedback on yesterday’s episode of The 5…
“Virgin Trains, Apple, Gold, Tesla, Silver, Apple, Gold, Virgin Galactic, Dr Pepper, Apple, Gold, Tesla, Silver and — ‘Ray.’
“This email is more all over the place than a bee in a hurricane.
“Thanks — but next time I’ll look at the signature. And if the email is attributed to ‘Dave Gonigam,’ I won’t bother reading it.
“Apparently he has the attention span of — wait — got distracted.”
The 5: Dude, our records show you receive this e-letter as a bonus to a paid subscription you got in 2016.
You’re only now noticing we address more than one topic a day?
Try to have a good weekend,
The 5 Min. Forecast
P.S. Chalk up another winner for readers of Alan Knuckman’s Daily Double Club — 100% gains playing options on UNG, the big natural-gas ETF.
For the record, that’s the second double and the sixth winning play this week.
Yes, there’s more where that came from. But please note we can allow only 200 new members to the Daily Double Club each day. And even if we don’t reach that total today, this web page will go dark tonight at midnight.